EX-99.01 5 0005.txt HISTORICAL FINANCIAL STATEMENTS OF CHECKPOINT Exhibit 99.01 REPORT OF INDEPENDENT AUDITORS To: The Board of Directors Checkpoint (Holdings) Limited We have audited the consolidated balance sheets of Checkpoint (Holdings) Limited as at April 30, 2000 and 1999, and the related consolidated profit and loss accounts, reconciliation of movements in shareholders' funds and cash flow statements for the year ended April 30, 2000 and the period January 11, 1999 (inception) to April 30, 1999 and the consolidated profit and loss account, reconciliation of movements in shareholders' funds and cash flow statement of Checkpoint Security Services Limited for the period May 1, 1998 to March 10, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with United Kingdom auditing standards and United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Checkpoint (Holdings) Limited at April 30, 2000 and 1999 and the consolidated results of its operations and its consolidated cash flows for the year ended April 30, 2000 and the period January 11, 1999 (inception) to April 30, 1999 and the consolidated results of operations and consolidated cash flows of Checkpoint Security Services Limited for the period May 1, 1998 to March 10, 1999, in conformity with accounting principles generally accepted in the United Kingdom which differ in certain respects from those generally accepted in the United States (see Note 24 of Notes to the Accounts). /s/ Ernst & Young Reading, England November 10, 2000 REPORT OF INDEPENDENT AUDITORS To: The Board of Directors Checkpoint (Holdings) Limited We refer to the accompanying profit and loss account, cash flow statement and reconciliation of movements in shareholders' funds for the year ended 30 April 1998. We were statutory auditors to the company for the year ended 30th April 1998 and issued an unqualified opinion on the financial statements for that year. Those financial statements were prepared in conformity with accounting policies generally accepted in the United Kingdom. We conducted our audit in accordance with Auditing Standards generally accepted in the United Kingdom. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. In our opinion the financial statements gave a true and fair view of the profits and cash flows of the company for the year ended 30 April 1998 in conformity with accounting policies generally accepted in the United Kingdom. The company changed its method of accounting for the recognition of certain revenue in the year ended 30 April 1999 which resulted in a restatement of the comparative figures in the 30 April 1999 accounts as required by United Kingdom accounting standards. This is further explained in note 2. GUILDFORD /s/ SMITH & WILLIAMSON ENGLAND 10 November 2000 CHARTERED ACCOUNTANTS REGISTERED AUDITOR 2 Checkpoint (Holdings) Limited and predecessor --------------------------------------------------- CONSOLIDATED PROFIT AND LOSS ACCOUNTS for the periods from 1 May 1997 to 30 April 2000
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan. 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 Note (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 TURNOVER 3 20,670 2,838 15,821 15,183 Continuing operations 20,186 2,838 15,821 15,183 Discontinued operations 484 - - - Cost of sales 8,101 1,124 5,995 5,845 Continuing operations 7,928 1,124 5,995 5,845 Discontinued operations 173 - - - ------ ------ ------- ------ GROSS PROFIT 12,569 1,714 9,826 9,338 Administrative expenses 13,836 1,808 9,057 8,400 Redundancy costs - continuing activities 322 - - - ------ ------ ------- ------ 14,158 1,808 9,057 8,400 ------ ------ ------- ------ Continuing activities 13,853 1,808 9,057 8,400 Discontinued activities 305 - - - OPERATING (LOSS)/PROFIT 4 (1,589) (94) 769 938 Loss on sale of subsidiaries - discontinued activities 12 (338) - - - Interest receivable 23 7 - 1 Interest payable 5 (1,447) (195) (212) (154) ------ ------ ------- ------ (LOSS)/PROFIT FOR THE FINANCIAL PERIOD (3,351) (282) 557 785 Taxation on ordinary activities 8 - - 316 380 ------ ------ ------- ------ (LOSS)/PROFIT FOR THE FINANCIAL PERIOD (3,351) (282) 241 405 Dividends 9 - - 50 250 ------ ------ ------- ------ RETAINED (LOSS)/PROFIT FOR THE FINANCIAL PERIOD (3,351) (282) 191 155 ====== ====== ======= ======
There were no recognised gains or losses other than the results of the group reported above. A reconciliation to US GAAP is presented in note 24. The accompanying notes form an integral part of these financial statements. 3 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS as at 30 April 2000 and 30 April 1999
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 Note (Pounds)000 (Pounds)000 FIXED ASSETS Intangible fixed assets 10 9,446 11,466 Tangible fixed assets 11 1,737 2,140 Investments 12 33 6 ------ ------ 11,216 13,612 CURRENT ASSETS Stocks 13 1,235 1,420 Debtors 14 4,562 4,420 Cash at bank and in hand 1,351 773 ------ ------ 7,148 6,613 CREDITORS: amounts falling due 15 6,370 5,441 within one year ------ ------ NET CURRENT ASSETS 778 1,172 ------ ------ TOTAL ASSETS LESS CURRENT LIABILITIES 11,994 14,784 CREDITORS: amounts falling due after more than one year Loans 16 13,233 12,744 Obligations under hire purchase contracts and finance leases 17 34 301 ------ ------ 13,267 13,045 ------ ------ (1,273) 1,739 ====== ====== CAPITAL AND RESERVES Called up share capital 18 222 207 Share premium account 19 1,946 1,814 Profit and loss account 19 (3,441) (282) ------ ------ EQUITY SHAREHOLDERS' FUNDS (1,273) 1,739 ====== ======
A reconciliation to US GAAP is presented in note 24. The accompanying notes form an integral part of these financial statements. ------------------------------------------------------------------------------- 4 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS for the periods from 1 May 1997 to 30 April 2000
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 11 January 1 May 1 May 1999 to 1999 to 1998 to 1997 to 30 April 30 April 10 March 30 April 2000 1999 1999 1998 Note (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES a 2,238 (129) 717 964 RETURNS ON INVESTMENT AND SERVICING OF FINANCE Interest received 23 7 - 1 Interest paid (614) (54) (165) (154) Interest element of finance lease rental payments (35) (8) (47) - Issue costs of new loans - (250) - - ------ ------ ------ ------ (626) (305) (212) (153) ------ ------ ------ ------ TAXATION Corporation tax (paid)/received (159) 17 (61) (201) ------ ------ ------ ------ CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire tangible fixed assets (404) (33) (980) (791) Payments to acquire intangible fixed assets (50) - - - Payments to acquire investment - - (6) - Receipts from sale of tangible fixed assets 6 7 104 70 Receipts from sale of investment 94 - - - ------ ------ ------ ------ (354) (26) (882) (721) ------ ------ ------ ------ ACQUISITIONS AND DISPOSALS Purchase of subsidiary undertaking - (11,535) - - Net cash acquired with subsidiary undertaking - (945) - - Net cash disposed of with subsidiary undertaking (293) - - - ------ ------ ------ ------ (293) (12,480) - - ------ ------ ------ ------ EQUITY DIVIDENDS PAID - - (203) (128) FINANCING Finance lease repayments (315) (62) 243 77 New long term loans - 5,325 - (66) New ordinary shares issued 114 2,071 1 44 Share issue costs - (50) - - New loan stock - 6,412 - - Repayment of long term loans (46) - (91) - ------ ------ ------ ------ (247) 13,696 153 55 ------ ------ ------ ------ INCREASE/(DECREASE) IN CASH b 559 773 (488) (184) ====== ====== ====== ======
Cash flows under US GAAP are summarised in note 24. The accompanying notes form an integral part of these financial statements. -------------------------------------------------------------------------------- 5 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS for the periods from 1 May 1997 to 30 April 2000 a. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 11 January 1 May 1 May 1999 to 1999 to 1998 to 1997 to 30 April 30 April 10 March 30 April 2000 1999 1999 1998 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 Operating (loss)/profit (1,589) (94) 769 938 Exchange adjustments - - - (1) Amortisation 2,070 279 - - Depreciation 684 109 619 600 Profit on sale of fixed assets (7) (2) (55) (30) Decrease/(Increase) in stocks 121 (160) (85) (337) Increase in debtors (230) 38 (1,089) (1,025) Increase in creditors 997 (299) 558 819 Employee share scheme charge 192 - - - ---------- ---------- ---------- ---------- Net cash inflow from operating activities 2,238 (129) 717 964 ========== ========== ========== ==========
b. ANALYSIS OF NET DEBT Checkpoint Security Services Limited
At Cash At Cash At 1 May flow 30 April flow 10 March 1997 1998 1999 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 Cash at bank and in hand 143 (100) 43 138 181 Bank overdraft (414) (84) (498) (626) (1,124) ------ ------ ------ ------ ------ Cash (271) (184) (455) (488) (943) Debt due after one year (1,067) 101 (966) 21 (945) Debt due within one year (274) (112) (386) (28) (414) ------ ------ ------ ------ ------ (1,612) (195) (1,807) (495) (2,302) ====== ====== ====== ====== ======
------------------------------------------------------------------------------- 6 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED STATEMENTS OF CASH FLOWS for the periods from 1 May 1997 to 30 April 2000 b. ANALYSIS OF NET DEBT (continued) Checkpoint (Holdings) Limited
Cash Acquisitions/ At Cash Other At flow Disposals 30 April flow non-cash 30 April 1999 movement 2000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Cash at bank and in hand 773 - 773 578 - 1,351 Bank overdraft - - - (19) - (19) ------ ------ ------ ------ ------ ------ Cash 773 - 773 559 - 1,331 Loans (11,487) (2,038) (13,525) 46 (932)* (14,411) Finance lease obligations 62 (638) (576) 315 - (261) ------ ------ ------ ------ ------ ------ (10,652) (2,676) (13,328) 920 (932) (13,340) ====== ====== ====== ====== ====== ======
* Relates to interest paid in the form of additional loan notes issued. c. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Increase/(decrease) in cash in the period 559 773 (488) (184) Cash inflow/(outflow) from increase in loans 361 (11,675) (7) (11) Issue costs of new loans - 250 - - ------ ------ ------ ------ Change in net debt arising from cash flows 920 (10,652) (495) (195) Loans and finance leases acquired with subsidiaries - (1,359) - - Loan stock issued on acquisition of subsidiary - (1,317) - - ------ ------ ------ ------ Change in net debt arising from cash flows 920 (13,328) (495) (195) Other non-cash movement (932) - - - ------ ------ ------ ------ Movement in net debt (12) (13,328) (495) (195) Net debt at beginning of period (13,328) - (1,807) (1,612) ------ ------ ------ ------ Net debt at end of period (13,340) (13,328) (2,302) (1,807) ====== ====== ====== ======
------------------------------------------------------------------------------- 7 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 1. ACCOUNTING POLICIES Accounting convention The accounts are prepared under the historical cost convention in accordance with applicable United Kingdom accounting standards. Basis of consolidation The accounts present the consolidated financial position for Checkpoint (Holdings) Limited as at its last two accounting reference dates and the results of operations and cash flows of Checkpoint (Holdings) Limited and its predecessor Checkpoint Security Services Limited for the three years to its last accounting reference date. The results and cash flows are presented for the following periods: 1 May 1997 to 30 April 1998; 1 May 1998 to 10 March 1999 (date of acquisition of Checkpoint Security Services Limited by Checkpoint (Holdings) Limited); 11 January 1999 to 30 April 1999 (date of incorporation of Checkpoint (Holdings) Limited to accounting reference date); and 1 May 1999 to 30 April 2000. Checkpoint Security Services Limited has been included in the group accounts using the acquisition method of accounting. Depreciation and amortisation Depreciation and amortisation are calculated on the straight line basis so as to write off the cost of intangible and tangible fixed assets over their estimated useful lives which are as follows: Short leasehold improvements - over the length of the lease Freehold buildings - 50 years Office equipment - 3 to 10 years Motor vehicles - 4 to 5 years Advance royalty - 3 years Goodwill - 5 years Deferred Taxation Deferred taxation is provided using the liability method on all timing differences, including those relating to pensions and other post-retirement benefits, to the extent that they are expected to reverse in the future without being replaced, calculated at the rate at which it is anticipated the timing differences will reverse. Advance corporation tax which is expected to be recoverable in the future is deducted from the deferred taxation balance. Deferred taxation assets are only recognised if recovery without replacement by equivalent debit balances is reasonably certain. Stocks Stocks are valued at the lower of cost and net realisable value. Cost includes all costs included in bringing each product to its present location and condition. Net realisable value is based on established selling price less any further costs expected to be incurred to completion and disposal. -------------------------------------------------------------------------------- 8 Checkpoint (Holdings) Limited and predecessor -------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 1. ACCOUNTING POLICIES (continued) Research and development Research and development expenditure is written off as incurred. Goodwill Goodwill is valued as the difference arising on acquisition between the purchase price paid and the fair value of separately identifiable tangible and intangible assets acquired. Positive goodwill arising on acquisitions since 1 January 1998 is carried on the balance sheet and is amortised over its useful life on a straight line basis. It is reviewed for impairment at the end of the first full financial year following the acquisition. Goodwill arising on acquisitions prior to 31 December 1997 was set off directly against reserves. Goodwill previously eliminated against reserves has not been reinstated on implementation of FRS 10. Leases and hire purchase commitments Assets held under finance leases and hire purchase contracts are capitalised at their fair value on the inception of the leases and depreciated over their estimated useful lives. The finance charges are allocated over the period of the lease in proportion to the capital amount outstanding. Rentals payable under operating leases are charged in the profit and loss on a straight line basis over the lease term. Service contracts Turnover relating to service contracts is recognised evenly over the period of the contract. Employee share award scheme Where share options or shares are granted to employees the company recognises as a charge in the profit and loss account the difference between the fair value of the shares at the date the award is made and the amount of the consideration the participants may be required to pay for the shares. This charge is spread evenly over the period in which the share options vest or immediately if shares are issued. 2. PRIOR YEAR ADJUSTMENT In periods prior to 30 April 1999 the company recognised turnover for service contracts at the start of the contract. As from 1 May 1998 the company now recognises the turnover evenly over the period of the contract in order to match the revenue with the incidence of costs. The effect of this change in policy was to reduce the operating profit before taxation by (Pounds)333,678 in the year to 30 April 1999 and to create an accrual for deferred revenue of (Pounds)1,598,631 at 30 April 1999. The prior period comparatives have been adjusted accordingly. The change in policy has no effect on the cashflow reported. -------------------------------------------------------------------------------- 9 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 3. TURNOVER Turnover is attributable to the principal activities of the group which are the design, development, sale and support of secure payment and documentation management solutions and services. Geographical analysis of turnover is as follows:
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 UK 18,818 2,420 13,380 12,512 Overseas 1,852 418 2,441 2,671 ------ ----- ------ ----------- 20,670 2,838 15,821 15,183 ------ ----- ------ -----------
4. OPERATING PROFIT ON ORDINARY ACTIVITIES Profit on ordinary activities is stated after charging:
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Amortisation 2,070 279 - - Depreciation charge - owned assets 518 71 402 379 - assets under hire purchase contracts 167 37 217 221 Profit on disposal of fixed assets (7) (2) (55) (30) Auditor's remuneration - audit services (UK) 26 4 21 13 - audit services (Overseas) - - 3 3 - non-audit services 5 1 5 16 Research & development costs (inclusive of salary costs) 767 146 861 1,030 Operating lease costs - land and buildings 197 28 186 172 - other 298 43 246 151 ------ ----- ------ -----------
In addition to the amounts disclosed above, the auditors received (Pounds)347,640 for non-audit services in relation to the disposal of Checkpoint Security Services Limited on 11 March 1999. -------------------------------------------------------------------------------- 10 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 5. INTEREST PAYABLE
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 On bank loans and overdrafts 450 70 163 82 On other loans 962 117 2 37 Hire purchase interest 35 8 47 35 ------- ------- ---------- ------- 1,447 195 212 154 ======= ======= ========== =======
6. STAFF COSTS
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Wages and salaries 7,267 888 5,520 5,084 Social security costs 735 84 524 541 Pension contributions 70 12 78 86 ------- ------- ---------- ------- 8,072 984 6,122 5,711 ======= ======= ========== ======= The average number of persons employed during the period was as follows: Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 No. No. No. No. Finance and administration 26 7 17 18 Sales and marketing 70 31 75 67 Customer support and engineering 102 39 94 60 Research, development and technology 42 14 35 34 ------- ------- ---------- ------- 240 91 221 179 ======= ======= ========== =======
-------------------------------------------------------------------------------- 11 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 7. DIRECTORS' REMUNERATION
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Aggregate emoluments (including benefits in kind) 635 92 696 793 Aggregate contributions to individual money purchase pension scheme - - 78 86 ------------- ----------- ---- ----------- 635 92 774 879 ------------- ----------- ---- ----------- The highest paid director was remunerated as follows: Emoluments (including benefits in kind) 160 23 94 114 Contribution to money purchase pension scheme - - - - ------------- ----------- ---- ----------- 160 23 94 114 ------------- ----------- ---- -----------
8. TAXATION
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 UK corporation tax - - 185 228 (Over)/under provision in previous period - - (64) 152 ACT recoverable written off - - 51 - Overseas tax - - 144 - ------------- ----------- ---- ----------- - - 316 380 ------------- ----------- ---- -----------
At 30 April 2000 the Checkpoint (Holdings) Limited group had an unrecognised deferred tax asset of (Pounds)272,000 (30 April 1999: (Pounds)78,000). This related to taxation losses carried forward of (Pounds)132,000 (30 April 1999: (Pounds)50,000), depreciation charged in advance of capital allowances of (Pounds)64,000 (30 April 1999: (Pounds)28,000) and a capital loss of (Pounds)76,000 (30 April 1999: (Pounds)nil) relating to the disposals of the subsidiaries in the period. At 10 March 1999 the Checkpoint Security Services Limited group had an unrecognised deferred taxation asset of (Pounds)28,000 which related to depreciation charged in advance of capital allowances. -------------------------------------------------------------------------------- 12 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 9. DIVIDENDS
Checkpoint (Holdings) Checkpoint Security Limited Services Limited 1 May 1999 11 Jan 1999 1 May 1998 1 May 1997 to 30 April to 30 April to 10 March to 30 April 2000 1999 1999 1998 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Paid: On `A' Ordinary shares - - 11 22 On Ordinary shares - - 39 74 Proposed: On `A' Ordinary shares - - - 35 On Ordinary shares - - - 119 ---- ----- -------- ----------- - - 50 250 ---- ----- -------- -----------
10. INTANGIBLE FIXED ASSETS
Checkpoint (Holdings) Limited 11 January 1999 to 30 April 2000 Advance royalty Goodwill Total (Pounds)000 (Pounds)000 (Pounds)000 COST: On incorporation 11 January 1999 - - - Additions - 11,745 11,745 ----- -------- ----------- At 30 April 1999 - 11,745 11,745 Additions 50 - 50 ----- -------- ----------- At 30 April 2000 50 11,745 11,795 ----- -------- ----------- AMORTISATION: On incorporation 11 January 1999 - - - Charge in the period - 279 279 ----- -------- ----------- At 30 April 1999 - 279 279 Charge in the year - 2,070 2,070 ----- -------- ----------- At 30 April 2000 - 2,349 2,349 ----- -------- ----------- NET BOOK VALUE: At 30 April 2000 50 9,396 9,446 ===== ======== =========== At 30 April 1999 - 11,466 11,466 ===== ======== ===========
-------------------------------------------------------------------------------- 13 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 11. TANGIBLE FIXED ASSETS Checkpoint (Holdings) Limited 11 January 1999 to 30 April 2000
Short Freehold leasehold land & Office Motor improvements buildings equipment vehicles Total (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 COST: On incorporation 11 January 1999 - - - - - Acquisition of subsidiary undertaking 82 791 2,792 619 4,284 Additions - - 33 - 33 Disposals - - - (67) (67) ------- ------ ------ ------ ------ At 30 April 1999 82 791 2,825 552 4,250 Additions 10 6 388 - 404 Disposals - - (819) (371) (1,190) Disposal of subsidiary undertaking - - (74) - (74) ------- ------ ------ ------ ------ At 30 April 2000 92 797 2,320 181 3,390 ------- ------ ------ ------ ------ DEPRECIATION: On incorporation 11 January 1999 - - - - - Acquisition of subsidiary undertaking 18 54 1,604 388 2,064 Charge for the period - 2 86 20 108 On disposals - - - (62) (62) ------- ------ ------ ------ ------ At 30 April 1999 18 56 1,690 346 2,110 Charge for the period 17 12 578 78 685 On disposals - - (807) (296) (1,103) Disposal of subsidiary undertaking - - (39) - (39) ------- ------ ------ ------ ------ At 30 April 2000 35 68 1,422 128 1,653 ------- ------ ------ ------ ------ NET BOOK VALUE: At 30 April 2000 57 729 898 53 1,737 ======= ====== ====== ====== ====== At 30 April 1999 64 735 1135 206 2,140 ======= ====== ====== ====== ======
-------------------------------------------------------------------------------- 14 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 11. TANGIBLE FIXED ASSETS (continued) Included in freehold land and buildings is land valued at (Pounds)200,000 which is not depreciated. Included in the above are assets held under hire purchase and finance leases contracts as follows:
Office equipment Motor vehicles (Pounds)000 (Pounds)000 Cost at 30 April 2000 612 134 ======= ======= Accumulated depreciation at 30 April 2000 367 73 ======= ======= Cost at 30 April 1999 779 245 ======= ======= Accumulated depreciation at 30 April 1999 304 98 ======= =======
12. INVESTMENTS
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 Own shares 33 - Subsidiary - Checkpoint International SA de CV - 6 ------- ------- 33 6 ======= =======
The `own shares' are held by Checkpoint (Holdings) Limited Employee Benefit Trust. On 11 March 1999, the group acquired the Checkpoint Security Services Limited group of companies for consideration of (Pounds)12,000,000 satisfied by cash of (Pounds)10,682,903, the issue of loan notes of (Pounds)800,000 and the issue of loan stock of (Pounds)517,097. Goodwill arising on the acquisition has been capitalised and is being amortised over five years. The investment in Checkpoint Security Services Limited has been included in the company's balance sheet at its fair value at the date of acquisition. -------------------------------------------------------------------------------- 15 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 12. INVESTMENTS (continued) Analysis of the acquisition of Checkpoint Security Services Limited group of companies:
Net assets at date of acquisition: Book value and fair value to group (Pounds)000 Tangible fixed assets 2,226 Stock 1,260 Debtors 4,617 Cash (943) Creditors due within one year (4,552) Creditors due after one year (1,501) -------- 1,107 Goodwill arising on acquisition 11,745 -------- 12,852 ======== Discharged by: Cash 10,683 Loan notes 800 Loan stock 517 Costs associated with acquisition 852 ======== 12,852 ========
The Checkpoint Security Services Limited group of companies contributed (Pounds)1,938,533 to the group's net operating cash flows, paid (Pounds)43,378 in respect of net returns on investments and servicing of finance, and utilised (Pounds)386,474 for capital expenditure and financial investment. The Checkpoint Security Services Limited group of companies earned a profit after tax of (Pounds)432,701 in the year ended 30 April 1999 (1998: (Pounds)404,598), of which (Pounds)328,856 arose in the period 1 May 1998 to 11 March 1999. The summarised profit and loss account for the period from 1 May 1998 to the effective date of acquisition is as follows:
(Pounds)000 Turnover 15,821 ======= Profit before tax 569 Taxation (240) ------- 329 =======
There were no gains or losses in the period from 1 May 1998 to 11 March 1999 other than the profit of (Pounds)328,856 above. -------------------------------------------------------------------------------- 16 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 12. INVESTMENTS (continued) On 22 February 2000, the group completed the sale of Compagnie Nationale des Machines de Bureau SA (`CNMB'), a subsidiary of Checkpoint Security Services Limited. The sale was made to J Shore, a director of Checkpoint Security Services Limited. The disposal is analysed as follows:
Net assets disposed of: (Pounds)000 Fixed assets 36 Stock 62 Debts 193 Cash 293 Other creditors (301) --------- 283 Loss on disposal (283) ========= Satisfied by: Cash - =========
The profit attributable to members of the parent company include profits of (Pounds)14,518 made by CNMB up to its date of disposal. The cashflow relating to the disposal of CNMB was an outflow of (Pounds)293,284. During the year CNMB contributed (Pounds)30,368 of the group's net operating cash flows and utilised (Pounds)22,602 for capital expenditure and financial investment. On 7 January 2000, the group completed the sale of Checkpoint International SA de CV ("CISA"), a subsidiary of Checkpoint Security Services Limited. CISA had net assets of (Pounds)55,300 at the date of disposal for which (Pounds)1 cash was received, resulting in a loss on disposal of (Pounds)55,299. 13. STOCKS
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 Raw materials 350 449 Stocks of finished goods and goods for resale 885 971 ----- ----- 1,235 1,420 ===== =====
The replacement value of stock is not significantly different from the amounts disclosed above. -------------------------------------------------------------------------------- 17 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 14. DEBTORS
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 Trade debtors 3,916 3,920 Other debtors 76 61 Amount due from related undertakings - 44 Prepayments and accrued income 349 333 Corporation tax receivable 221 62 ----- ----- 4,562 4,420 ===== =====
15. CREDITORS: (amounts falling due within one year)
Checkpoint (Holdings) Limited 30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 Bank overdraft 19 - Current instalments due on bank loans (see note 16) 1,178 781 Obligations under HP and finance leases (see note 17) 227 275 Trade creditors 976 1,116 Other taxes and social security costs 712 738 Other creditors 2 20 Accruals 1,396 912 Deferred revenue 1,860 1,599 Corporation tax - - ----- ----- 6,370 5,441 ===== =====
-------------------------------------------------------------------------------- 18 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 16. LOANS
Checkpoint Checkpoint (Holdings) Services Limited Limited 30 April 30 April 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Amounts falling due: In one year or less or on demand 1,225 800 112 In more than one year but not more than two years 1,175 1,225 112 In more than two years but not more than five years 6,487 4,025 263 In more than five years 5,774 7,794 234 ------ ------ ------ 14,661 13,844 721 Less: issue costs (250) (319) - ------ ------ ------ Less: included in creditors: amounts falling 14,411 13,525 721 due within one year (note 14) (1,178) (781) (112) ------ ------ ------ 13,233 12,744 609 ====== ====== ====== Details of loans not wholly repayable within five years are as follows: Checkpoint Security Checkpoint (Holdings) Services Limited Limited 30 April 30 April 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Bank Mortgage - - 364 Bank Loan 1 - - 77 Fixed rate 11% to 14% Loan Stock 2004 to 2007 7,483 7,044 - Less: issue costs (132) (148) - Bank loan 2 6,000 6,000 - Less: issue costs (118) (152) - ------ ------ ------ 13,233 12,744 441 ====== ====== ======
The Bank Mortgage bears interest at 2% over Nat West Bank base rate for a term of 25 years from October 1992 repayable in equal instalments from November 1995. Bank Loan 1 bears interest at 2% over Nat West Bank base rate for a term of 10 years from September 1995 repayable in equal monthly instalments from September 1997. The loan stock is repayable in 6 equal half yearly instalments starting on 31 October 2004. Bank loan 2 is repayable in 6 equal half yearly instalments starting on 31 October 2004. -------------------------------------------------------------------------------- 19 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 17. OBLIGATIONS UNDER HIRE PURCHASE CONTRACTS AND FINANCE LEASES
30 April 30 April 2000 1999 (Pounds)000 (Pounds)000 In one year or less (note 15) 227 275 In two to five years 34 301 ---- ---- 261 576 ==== ====
18. SHARE CAPITAL Checkpoint Security Services Limited
10 March 30 April 1999 1998 (Pounds)000 (Pounds)000 AUTHORISED 213,200 Ordinary shares of 5p each 11 11 85,731 "A" Ordinary shares of 5p each 4 4 500,000 11% Redeemable Preference shares of (Pounds)1 each 500 500 ---- ---- 515 515 ==== ==== ALLOTTED, CALLED UP AND FULLY PAID 213,200 (1998: 213,135) Ordinary shares of 5p each 11 11 63,170 "A" Ordinary shares of 5p each 3 3 ---- ---- 14 14 ==== ====
During the period ended 10 March 1999, 65 Ordinary shares of 5p each were issued at (Pounds)15.75 each as part of an executive share scheme. During the year ended 30 April 1998, 2,795 Ordinary shares of 5p each were issued at (Pounds)15.75 each as part of an executive share scheme. The "A" Ordinary shareholders are entitled to a preferential dividend of 17.4133 pence per share each six months and then participate in any dividend declared to Ordinary shareholders in excess of that amount. -------------------------------------------------------------------------------- 20 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 18. SHARE CAPITAL (continued) On a return of Capital the "A" Ordinary shareholders have a right to receive in preference to payments to Ordinary shareholders (Pounds)3.166 per share plus any accrued dividend and then participate in any amount above this paid to Ordinary shareholders. "A" Ordinary and Ordinary shareholders have equal voting rights. Checkpoint (Holdings) Limited
30 April 30 April 2000 1999 Number (pounds)000 Number (pounds)000 A Ordinary Shares of 10p each 1,608,000 161 1,608,000 161 B Ordinary Shares of 10p each 240,000 24 240,000 24 Ordinary Shares of 10p each 552,000 55 552,000 55 ------ ------ 240 240 ====== ====== ALLOTTED, CALLED UP AND FULLY PAID 30 April 30 April 2000 1999 Number (pounds)000 Number (pounds)000 A Ordinary Shares of 10p each 1,608,000 161 1,608,000 161 B Ordinary Shares of 10p each 240,000 24 240,000 24 Ordinary shares of 10p each 370,570 37 223,200 22 ------ ------ 222 207 ====== ======
All allotted shares detailed above were allotted for (Pounds)1. The company's Employee Benefit Trust held 32,732 Ordinary Shares of 10p each at 30 April 2000. The rights attaching to each class of share are as follows: . As regards dividends: All classes rank pari passu until 1 May 2004. . As regards capital: On a return of assets the capital available for distribution shall pay firstly the A ordinary shareholders the amount credited as paid up on the A Ordinary Shares and secondly pay the B ordinary shareholders and ordinary stockholders (as if they were one class) the amounts paid up on their respective shares. Thereafter, all classes rank pari passu. . As regards voting: All classes rank pari passu. -------------------------------------------------------------------------------- 21 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 19. RECONCILIATION OF SHAREHOLDERS' FUNDS AND MOVEMENT ON RESERVES Checkpoint Security Services Limited 1 May 1997 to 10 March 1999
Called up Share Other Profit and share capital premium Reserve loss account Total (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 At 1 May 1997 14 294 400 8 716 Profit for the year - - - 405 405 Dividends - - - (250) (250) New shares issued - 44 - - 44 ----- ----- ----- ----- ------ At 30 April 1998 14 338 400 163 915 New shares issued - 1 - - 1 Profit for the period - - - 241 241 Dividends - - - (50) (50) ----- ----- ----- ----- ------ At 10 March 1999 14 339 400 354 1,107 ===== ===== ===== ===== ====== Checkpoint (Holdings) Limited 11 January 1999 to 30 April 2000 Called up Share Profit and share capital premium loss account Total (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 Loss for the period - - (282) (282) New shares issued 207 1,864 - 2,071 Share issue expenses - (50) - (50) ------ ----- ------ ------ At 30 April 1999 207 1,814 (282) 1,739 Loss for the period - - (3,351) (3,351) Share award scheme - - 192 192 New shares issued 15 132 - 147 ------ ---- ------ ------ At 30 April 2000 222 1,946 (3,441) (1,273) ====== ===== ====== ======
-------------------------------------------------------------------------------- 22 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 20. FINANCIAL COMMITMENTS The group has annual commitments under operating leases as follows.
Land and buildings Checkpoint Security Checkpoint (Holdings) Services Limited Limited 30 April 30 April 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Leases which expire within one year 38 - 9 Lease which expire in two to five years 11 58 54 Leases which expire after more than five years 112 104 104 ---- ---- ---- 161 162 167 ==== ==== ==== Other operating leases Leases which expire within one year 80 35 66 Lease which expire in two to five years 162 230 218 Leases which expire after more than five years - - - ---- ---- ---- 242 265 284 ==== ==== ====
21. RELATED PARTY TRANSACTIONS During the year ended 30 April 2000 Checkpoint Security Services Limited sold its shareholding in its subsidiary CNMB to J C Shore, a director of Checkpoint Security Services Limited (note 12). 22. ULTIMATE PARENT COMPANY Checkpoint (Holdings) Limited At 30 April 2000 and 30 April 1999, the company's immediate parent undertaking was Mercury Asset Management Limited. Copies of the company's accounts are available from 33 King William Street, London, EC4R 9DU. In the directors opinion the company's ultimate parent undertaking and controlling party was Merrill Lynch & Co. Inc., which is incorporated in the United States. Copies of its group accounts are available from The World Trade Center, New York, New York, 10080, United States. -------------------------------------------------------------------------------- 23 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 23. POST BALANCE SHEET EVENTS The entire share capital of Checkpoint (Holdings) Limited has been purchased by Bottomline Technologies Inc., a company incorporated in the United States. As part of the terms of the acquisition, the group has divested itself of its electromechanical business. 24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The consolidated accounts are prepared in accordance with accounting principles generally accepted in the United Kingdom ("UK GAAP") which differ from United States generally accepted accounting principles ("US GAAP"). The differences that are significant to the group relate to the following items. Revenue recognition The group's product range includes a number of items that have a software element to them. Under UK GAAP, revenue for these products was recognised in accordance with the terms of the contracts. These terms were typically for payment on delivery. Installation of the product is considered perfunctory and therefore, for any contracts where revenue had been booked but installation not completed, the costs of installation were accrued for. Under US GAAP, the rules for recognition of revenue are more stringent. As a result of not being able to provide Vendor-Specific Objective Evidence for all elements of the sale of products with a software element to them revenue is deferred until all elements of the contract have been completed. The cost of sales associated with the revenue is also deferred to `Other debtors'. Dividends In the consolidated accounts, final dividends and the related advance corporation tax ("ACT") are provided for in the year in respect of which they are proposed by the Board of Directors for approval by the shareholders. Under U.S. GAAP, dividends and the related ACT are not provided for until the dividends are declared. The following is a summary of the significant adjustments to income and shareholders' funds which would be required if U.S. GAAP were to be applied instead of U.K. GAAP: -------------------------------------------------------------------------------- 24 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
INCOME Checkpoint Security Checkpoint (Holdings) Services Limited Limited 1 May 1999 11 Jan 1999 1 May 1998 to 30 April to 30 April to 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 (Loss)/profit on ordinary activities as reported in the group profit and loss account (3,351) (282) 241 Adjustments: Revenue (205) (147) (741) Cost of goods sold 37 38 256 ------ ------ ------ Net income as adjusted to accord with US GAAP (3,519) (391) (244) ====== ====== ====== Shareholders' Funds Checkpoint Security Checkpoint (Holdings) Services Limited Limited 30 April 30 April 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Shareholders' funds as reported in the group balance sheets (1,273) 1,739 1,107 Adjustments: Current assets Other debtors 607 570 532 ACT recoverable - - (38) Creditors: amounts falling due within one year Deferred revenue (2,448) (2,243) (2,096) Dividends payable - - 153 ACT payable - - 38 ------ ------ ------ Shareholders' funds as adjusted to accord with US GAAP (3,114) 66 (304) ====== ====== ======
-------------------------------------------------------------------------------- 25 Checkpoint (Holdings) Limited and predecessor ------------------------------------------------------------------------------- NOTES TO THE ACCOUNTS for the periods from 1 May 1997 to 30 April 2000 24. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) GROUP STATEMENT OF CASH FLOWS The group cash flow statement prepared under U.K. GAAP presents substantially the same information that is required under U.S. GAAP but may differ, however, with regard to classification of some items within the statements and as regards the definition of cash under U.K. GAAP and cash and cash equivalents under U.S. GAAP. Under U.S. GAAP, cash and cash equivalents include short-term highly liquid investments but do not include bank overdrafts. Under U.K. GAAP cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, acquisitions, equity dividends and management of liquid resources and financing. U.S. GAAP, however, requires only three categories of cash flow to be reported: operating, investing and financing. Cash flows from and returns on investments, taxation and servicing of finance shown under U.K. GAAP would be included as operating activities under U.S. GAAP. The payment of dividends would be included as a financing activity under U.S. GAAP. Under U.K. GAAP all interest is treated as part of returns on investments and servicing of finance. Under U.S. GAAP capital expenditure and financial investment and acquisitions are reported within investing activities. The categories of cash flow activity under U.S. GAAP can be summarised as follows:
Checkpoint Security Checkpoint (Holdings) Services Limited Limited 1 May 1999 11 Jan 1999 1 May 1998 to 30 April to 30 April to 10 March 2000 1999 1999 (Pounds)000 (Pounds)000 (Pounds)000 Cash inflow/(outflow) from operating activities 1,453 (417) 444 Cash outflow from investing activities (647) (12,506) (882) Cash (outflow)/inflow from financing activities (228) 13,696 576 ----- ------- ---- Increase in cash and cash equivalents 578 773 138 Cash and cash equivalents At beginning of period 773 - 43 ----- ------- ---- At end of period 1,351 773 181 ===== ======= ====
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